Written by Eddy Weatherill - Chief Executive – Independent Banking Advisory Service (IBAS) - published in 'Your Business' in September 1994.
IBAS is a specialist banking organization, which operates in the most important part of any small business management - banking. Without good banking guidance and connections, even the best small business can fail. Independent of all banks, IBAS is able to collect and use information to assist our members in obtaining better banking facilities and support. Every small business owner knows what it’s like to feel lonely. Who can you turn to? Bankers lend money when they need to and take it back when you need it most.
If you have a problem IBAS is there to offer practical assistance. The most satisfying findings from our most recent survey was that many new members were coming to IBAS for practical assistance and guidance at the start-up of their business. Prevention is better than a cure and we will be enlarging on this area of education for small business start-ups.
The complaints we get are not decreasing. Banks have reaped a grim harvest over the last three years of final demands and possession order from once-proud small business owners who had the dubious pleasure of working for themselves. Many ended up working for the bank and losing everything they possessed. The added burden of further charges and fees gave banks profit and broke small business.
The banks cry: "Look at how much we’ve lost to small business failure." We would answer, where is the loss when the bank is still charging interest on a debt, even when it appears to have been written off?
The largest area of complaint in our last survey was excessive fees and account charges. Small business borrowers beware, our survey also indicates that staying with a bank even when unhappy does not make for a less complicated life. Many of our complaints are from customers of long standing with solid business histories who thought the bank would be loyal to them. This has proved to be incorrect!
Today’s small business bank customer has got to be better informed about banking, but, don’t forget the bank manager is even better informed and, most importantly trained to protect the bank’s interest, not yours. Every time a document is produced he or she will be fully aware of the consequences – will you?
The second highest number of complaints we receive concern dishonesty, incompetence and negligence – almost one in five are in this category. Many are based around alterations to documents, changes of arrangements, basic lack of training and poor support. (After all, don’t forget many banking staff have been made redundant and those that are left are under severe pressure.)
Of most concern to small businesses is the withdrawing of support. Again, almost one in five complaints concerned an overdraft that was being withdrawn in full, or in part. Trying to obtain new banking facilities when under pressure can mean disaster.
Of all the complaints, the most harrowing for the small business owner involves the director's personal guarantee. This has probably deprived more small business owners of their assets than any other document designed for bankers. It is ‘softly’ sold at the start of an arrangement, and the spouse or partner sees no danger.
One in eight of our complaints refer to bank personal guarantees signed to cover a business banking overdraft or loan. (see - Personal Guarantee Advice on Demand for Payment) Many cannot remember even signing the papers for the director's personal guarantee. The scandal is that the bank will continue to increase the debt with interest until the personal guarantee figure is approached or exceeded - before seriously attempting to collect the debt – providing of course, that you have property or assets capable of paying off the figure guaranteed.
The bank appears to make an assessment based on how much it can obtain in extra interest.This bleeds small business owners dry and at the same time holds up the economy. How long will it be before the small business has a ministry to protect their interests against the banks? How long will this government watch whilst banks continue to financially rape and pillage where possible?
By our calculations, 500,000 small business customers are unhappy with their banks. This has been a protected secret for too long and it has nothing to do with market share. IBAS continue to collect information and we welcome your one-page summary if you have a complaint about a bank and will include the information in our surveys. If you need our active assistance with any banking matter ring us on 01487 843444
- This article was written by Eddy Weatherill - Founder and Chief Executive – Independent Banking Advisory Service (IBAS) in September 1994.